The GBP/USD cross rose by over half a cent today as better than forecast UK services PMI figures helped boost the UKs and pounds performance, with GBP/USD exchange rates climbing from a low of $1.6699 to a high of $1.6770 on the back of the data release. Sterling also benefitted this afternoon from a number of weak economic releases from the States with non-farm employment change and trade balance numbers coming in well under the predicted level.
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The positive UK services PMI figures that were released this morning have once again highlighted the fact that the UK economy is continuing to improve. These latest numbers will start to add extra pressure on Mark Carney and the Bank of England's monetary committee raise interest rates in the UK sooner rather than later. It has been suggested that the Bank of England will look to raise interest rates in early 2015 but with the economy performing so well some economists are now predicting we could see a rise by the end of this year.
Over the past few months Mr Carney has tried to slow the pounds performance by talking down the currency. He has stated on a number of occasions that the UK economy is still on a rocky road and that the central bank are in no rush to raise rates. The problem facing the BoE though is that there is not much to support their comments as the UK keeps publishing better than expected economic numbers, so if the trend does continue the BoE may be left with little choice but to act.
How would this impact exchange rates?
A rise in interest rates will make a currency more appealing to investors. As I have said before everything is pointing to the UK acting before the likes of the Eurozone and United States. If that were to happen I can only see the pound going one way and that is up.
This has also been highlighted by some of the forecasts I have been receiving from my brokers, one is predicting we will see GBP/USD at $1.71 within the next three months and GBP/EUR will reach the dizzy heights of €1.25.
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